Trend
DMI Indicator on a Live Gold Chart
The DMI splits recent movement into two shares, +DI for the upward push and −DI for the downward push, and adds the ADX to show how lopsided the two are. When +DI sits above −DI the up moves have been bigger; when −DI is above, the down moves have. On gold the two DI lines swap places often in a sideways stretch and spread apart when a real move starts.
What it shows
ADX, +DI and −DI share one pane and one scale, so you can read the strength line against the two direction lines directly. No guide levels are drawn.
How Pravex works it out
- For each candle compare it with the one before. Up = today’s high − yesterday’s high; down = yesterday’s low − today’s low. +DM is the up value when it is bigger than the down value and above 0, otherwise 0. −DM is the mirror.
- Measure each candle’s true range, which counts a gap from the last close as part of its move. Give +DM, −DM and the true range a Wilder average over the direction length, 14 candles.
- +DI = 100 × smoothed +DM ÷ smoothed true range. −DI = 100 × smoothed −DM ÷ smoothed true range.
- ADX = 100 × a Wilder average, over the ADX averaging length, of |+DI − −DI| ÷ (+DI + −DI). Where the sum is 0 the divisor is taken as 1.
Settings
| Setting | Default | What changing it does |
|---|---|---|
| Direction length | 14 | How many candles the directional moves and the true range are averaged over. A shorter length makes +DI and −DI swing and cross more often. |
| ADX averaging | 14 | How many candles the ADX average covers, from 1 up to 50. It changes only the ADX line, not +DI or −DI. |
How traders read it
The first thing to look at is which of +DI and −DI is higher. +DI above −DI says upward moves have been larger on average; −DI above says downward ones have been. The crossing of the two is the classic trigger.
The gap between them matters. Lines pressed together say the push is about even. A wide gap says one side has been in charge for a while.
The ADX line tells you how much to trust a cross. A cross while the ADX is low and flat often comes in a range and fades. A cross with the ADX already climbing is a firmer picture of a new lean.
When it misleads
The DI lines depend only on the highs and lows, so a single candle with a long wick can swing them. In a quiet gold range +DI and −DI trade places repeatedly, and every cross is a false start. The ADX smoothing means that by the time the ADX confirms a trend, a good part of the move is already behind it. There is no volume in it, and no knowledge of what happens next.
Questions and answers
What are +DI and −DI?
+DI is the smoothed upward movement as a percentage of the smoothed true range, and −DI is the same for downward movement. They tell you which side has been moving price more.
What is the difference between DMI and ADX?
They share one calculation. The ADX page shows only the ADX line, while the DMI page also draws +DI and −DI, which carry the direction.
How do I filter out false +DI and −DI crosses?
Take a cross only when the ADX is already rising, or raise the direction length from 14 to 20 or so (an example) so the DI lines cross less. Both cost you a later entry; they cut down the swaps in a quiet range.
Why are +DI and −DI both low at the same time?
Both are shares of the true range. When candles overlap and neither the highs nor the lows extend much, +DM and −DM stay small against the range, so both lines sink together. That is a range, and the ADX usually sags with them.
Related: Average Directional Index, Aroon, Parabolic SAR, Williams Alligator, every indicator.
Not financial advice. Read our disclaimer.
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